New Month, But Same Depressing Markets

While investors hoped that a new year would bring better results, a plethora of downbeat earnings reports, poor corporate outlooks, gloomy economic data, and heightened concerns over the health of many large financial firms plagued the markets in January.

For the fifth month in a row, the Dow ended up in negative territory – matching its five-month losing streak back in November 2007-March 2008. In fact, the Dow has only posted a gain in three of the last fifteen months.

While January is typically one of the better months for the markets overall, the Dow’s decline of 8.84% last month was its worst January ever. Weighing down the Dow the most last month were Caterpillar , Wal-Mart , Bank of America , and Procter & Gamble – each of which is at or very near a new 52-week low. Broader indices are faring no better to start out the year, as both the S&P 500 and the Russell 2000 had their worst January ever.

Financials Fall Apart…Again

Although the Dow’s weak performance last month didn’t come close to its huge 14% plunge back in October, financials fared much worse. Don’t let last week’s gains (See Financials Big Gains) fool you – financial stocks performed terribly in January ahead of their earnings reports, with expectations that many of them would post huge losses and need even more capital. Plunging 26.6% last month, the S&P 500 Financials sector had its worst month ever – even exceeding the sector’s 22.7% decline from October, which followed the collapse of the likes of Fannie Mae, Freddie Mac, Lehman Brothers, and AIG. Here are some of the worst-performing stocks in the S&P 500 Financials sector last month:

Over the past few days, the markets have been weighed down by weak economic data, downbeat corporate earnings forecasts, and concerns that many financial firms may post large quarterly losses in the upcoming weeks. Now at its lowest level since December 1, the Dow is down for its sixth straight session – its longest losing streak since the beginning of October. Despite this weakness, the Dow still sits about 10% above its November 21 intraday low (7,449.38) – a level that could be retested in the coming weeks. As we start a new month, February does not look like it will be the start of a turn around.